What Is Contract Hire?


Business Contract Hire and Personal Contract Hire (PCH) are a form of leasing. It’s a long-term rental agreement whereby you have the use of a vehicle for a fixed period of time usually between 2 and 5 years and for a predetermined mileage at a fixed price, which is called a rental. When calculating the rental charge that the finance company will make for you to have use of the vehicle, they will consider a number of factors including:

  • What the vehicle is (the make, model, derivative etc)
  • How much the finance company have to pay the purchase of the vehicle (utilising both ours and the contract hire company’s enormous buying power)
  • The cost of Road Fund Licence over the term of the agreement 
  • How long the agreement is for 
  • The total mileage that the vehicle will do under the agreement with you
  • The anticipated value of the vehicle at the end of the contract (which is commonly called the residual value) 

In basic terms, the rental that you pay is the cost of ownership to the finance company which is then split over the term of the agreement. You will pay an agreed amount as an initial rental on delivery of the vehicle followed by subsequent monthly rentals.  The higher your initial rental is the lower your monthly rentals will be and conversely the lower your initial rental, the higher your monthly rentals will be. Rentals are subject to vat. PCH quotations include vat and business quotations will be net of vat.

You must ensure that the vehicle remains road legal and is maintained in accordance with the manufacturer’s recommendations. You are required to comprehensively insure the vehicle, must not part company with it and if you wish to take it abroad this may be for a period of not more than 28 days and requires authorisation from the finance company. Please note that additional charges may apply during the course of the agreement, for example if there are changes to vat or road fund licence, for any undischarged fines, additional administration of your account.

At the end of the agreement, the vehicle must be returned to the finance company. You may incur additional charges at the end of the agreement. Examples of this include if the vehicle is returned with a higher mileage than the agreed end mileage, if the vehicle is unroadworthy or is not in a satisfactory condition and has damage to the bodywork, wheels or interior, dents and if it has incomplete service history.


Why Should I Contract Hire?

Contract Hire has become increasingly popular for both private individuals and businesses who have no desire to own the vehicle. For businesses it may also be vat and tax efficient.


Get a really good deal

We have relationships with the UK’s top funders. Between us, we buy thousands of vehicles every year allowing us to negotiate and secure fantastic discounts, which are far greater than those offered to general consumers. Plus being independent, we’re free to shop around for the best deal resulting in our ability to offer highly competitive deals.


Drive the vehicle that you want

Why would you want to incur a substantial outlay to own something which simply depreciates in value? Contract Hire offers you the ability to drive the vehicle of your choice with a low initial outlay and by also including a maintenance package will allow you to have fixed cost motoring.  For information about maintenance packages see ‘Maintenance – what are the benefits’


A new vehicle every few years

Having the ability to change your vehicle every few years enables you to take advantage of the latest models, new technology and improved running costs.


Is Contract Hire suitable for you?

Have a look at our suitability guides ‘Business Contract Hire’ and ‘Personal Contract Hire’ factsheets and our ‘FAQs’ page for further information. or speak to us on 01993 894981. If Contract Hire isn’t right for you, we have a range of different finance options so take a look at our Finance Options page. We know that it’s important to choose the right finance plan to suit your needs so please call us on 01993 228884 and we’ll talk you through the options.